Nuvama sees 37% upside potential in Royal Orchid Hotels as it will benefit immensely from the current upcycle

Nuvama says Royal Orchid Hotels plans to add ~1,600 rooms across 21 hotels in the next 12 months. It sees a 5% growth in ARR in FY25 on the back of healthy domestic demand, constrained supply in the industry, and likely improvement in the product mix. It sees ROHL as one of the key beneficiaries of sectoral tailwinds. It has downgraded its FY26 EBITDA/PAT estimate by 9%/10% to account for near term margin pressures due to refurbishment and renovations and a slightly lower-than-expected occupancy. The Target Price is revised to INR431 (12x FY26E EV/EBITDA). Maintain ‘BUY’.

“ROHL is going through an investment phase and is taking steps in the right direction by: i) refurbishing its existing inventory, ii) shifting its focus from volume to value (expansion in the five-star segment), and iii) hiring the right talent. These changes will help ROHL to immensely benefit from the current upcycle. We see the valuation gap with peers narrowing as the restructuring plays out. As we are cognizant of near-term margin pressures, we have revised our TP to INR431 (12x FY26E EV/EBITDA) from INR477 earlier. Maintain ‘BUY’.”